Archive for the ‘How Not To Start A Business…’ Category

The Decision

So I was selling office supplies and office furniture for about 3 years at a small company in Salt Lake City and things were going pretty well. Making enough money in sales to support my family and feeling good about the progress I was making. Then some interesting things happened at work and it started to become evident that the good times would not likely continue.

It was at this point that I started exploring other options for employment. There were other sales positions out there and I now had confidence in my abilities, but I was more intrigued with the idea of helping run a business. I looked into some “franchise” type opportunities where you essentially “own” a job. And then there was the one option that seemed the most risky and most difficult to succeed in: to start an office supply company of my own.

Garth was another sales person I worked with. He was having similar doubts with the way things were going at our current place and we discussed at length how we would do it if it was our business. Initially we were just venting frustrations about the unpleasant changes that were being made, but the more we talked the more we realized we shared a similar vision of how to run a company. We were both driven enough to succeed and felt like we could own a business together. It definitely got me thinking I needed to explore this idea further.

Now before you take the jump to start a company there are definitely a lot of things to consider. Here was my list:

  1. Can I afford to start a business? Umm, no I couldn’t on my own, so we would need to talk to a bank about getting a loan or some other method of funding to get started.
  2. Is the business a good one to start? Can we succeed by starting an office supply company?
  3. What are all the risks?
    1. Going back to unstable income or, even worse, actually losing money.
    2. Losing so much money that you lose everything, declare bankruptcy and feel like a failure at every family party – “oh, there goes Lee, did you hear how he tried to run a paper company at the beginning of the economic downturn? Yeah, his wife stayed with him and she works at the bank while he sits at home taking care of the kids…what a bum.”
    3. Causing so much financial stress that my wife would leave me. To be fair to Lisa I never heard this or anything close to it from her at all. She has been 100% supportive from the very beginning, but these things still concerned me. Which is why her support has been invaluable. I never would have done this without her support.
    4. Getting sued by my old boss. We had a pretty good idea that if we tried to create a competing company we would get sued. That is not the most exciting idea in the world.

So I did my best to answer these questions in the only ways I knew how. We ran some projections, talked to Zion’s Bank Small Business Department and continued to contemplate this crazy idea that we thought we could somehow make work out. I distinctly recall thinking that if I was ever gonna risk bankruptcy I should probably do it while I was young and hadn’t accumulated much of anything. At least it would be less painful then if I tried to do it while in my 40’s or 50’s with teenage children and a lot more expenses to deal with. If you’re gonna fall on your face you may as well start as close to the floor as possible.

We’re now into this going on 8 years and I still look at that list and wonder to myself why I ever agreed with Garth that we should go ahead with the plan. And I wonder why he ever thought it was a good idea either…I’m telling you we had no idea what we were getting ourselves into. Oh the stories we have to tell.

Good sales people are hard to come by. My dad actually helped me get an interview with a local copier sales company after I graduated from college. I don’t remember the guys name, but I will never forget the interview. First of all it was apparent that this man had zero interest in hiring me. He was just doing my dad a favor. He told me, “sales is the greatest job in the world. Salesmen make everything better. They make the economy move…” He went on and on about how great salespeople are and it was so shocking to hear. My perception of sales to that point was what I think most people have: the sneaky used car salesman that wants the keys to your car and won’t let you have them back, Ron Popeil giving a convincing argument on TV that I need spray on hair or the people knocking on your door about the most amazing cleaner, vacuum, satellite service or magazine subscriptions. Up to that point I had never considered sales as an honorable career, but rather I was convincing myself that I was ok with having a dirty job just so long as it helped me get what I wanted a la Robert Redford in Sneakers.

Sales, May all your dreams come true

As mentioned before I interviewed and was seriously considered for three different jobs, but only one of them was offered. That makes choosing your job really easy…hmmm let’s see accept the sales position with a small office supply company or continue to be a lazy bum and help my wife start to question if she married the wrong guy? Decisions, decisions.

Had either of the other two companies offered a job I probably would have accepted. Despite knowing that sales jobs are where you can make the best money and that sales was a better fit for what I wanted long-term. At that point fear of failing was keeping me from making the right decision. Call it fate or luck, either way I was put in a situation where selling was the only option.

There were two men that ran the office product business, Terry was the owner and Phil was the sales manager. I believe I met with Phil once or twice before accepting the position. Phil helped me realize that selling office supplies was a good fit since I had some experience as a delivery driver with Corporate Express. Then I went in and met with both of them to negotiate my pay. In this meeting Terry and Phil both reviewed their expectations of a salesman. I would not be given any existing accounts and would have to prove myself worthy by bringing in business all on my own. They didn’t provide any leads or any appointments. They also didn’t really care to see me as long as I brought in new business. Just get out there and sell. It sounded pretty scary and very challenging. Since I hadn’t left by this point Terry opened up more about compensation and said, “We don’t offer a base or any benefits for this job, but we think you can do this. We can look at offering you an advance on commissions so you can survive the first few months. What is the minimum amount you need to survive while you get going?”

My primary concerns in accepting this position were failure and somehow managing to incur more debt from a job. There are “jobs” out there where debt is a real possibility and this was starting to sound like one. And with a smaller advance the less pressure there would be to perform well right off. I am also cheap and keep good track of finances so I knew what I needed to pull my weight at home.

“$350.”

Not $350 /week, but $350/month. If I was bringing home at least $350/month then our budget at home could move on alright because my wife was working full-time at that point. Obviously I wasn’t gonna be happy just pulling in enough to make a car payment, but I realized that in sales you determine your salary. As you can probably imagine both Terry and Phil were thrilled with my answer although they hid it well. Terry did let me know later that for $350/month he wasn’t overly concerned about tracking it as an advance. I left their office that day with a job and they just hired some young kid to do sales for what works out to $2.18/hour!

Don't Worry Honey

There were a few experiences that shaped my perspective on how to be a good salesman, but let me be clear that sales is an art and not a science. These experiences certainly helped me become the salesman I was, but that doesn’t mean you should necessarily do the same things. Heck, this blog is about how not to do things. Really the goal in sales or any other career is to find something that works well with your personality.

Office supplies are to business what groceries are to homes. There certainly isn’t a monopoly on groceries out there and in office supplies there is plenty of competition. This became very obvious as I started making phone calls or went out to find new customers. Once a business gets to a certain size they start splitting up responsibilities and the person in charge of the “groceries” they like to call the office manager. This is the person in charge of keeping the office operational with the day to day consumables. Most often the office manager is a woman in the age range of 20-50 years old. If a small business has enough employees to have an office manager then they likely spend at least $200/month on office products. Once a company is spending this much or more then my job was to convince them that we were the best way to get their supplies. We offered an easy way to place their orders and free next day delivery. And, of course, we were the cheapest. If you can’t convince someone that your prices are the best then you may as well not even make the call.

After struggling to see much success the first few months I finally started to breakthrough and see some results. These moments are the confidence builders that help you realize you can make this sales thing work. I call them your, “Ah-Hah!” moments as inspired by one of the barbershop characters in “Coming To America.”


My first, “ah-hah!” moment happened when one of my friends had his wife call me because she was the office manager for a law firm in downtown Salt Lake City. She basically held my hand through the whole process of what they expected of their office supply salesman. It was a slam dunk account all because we were friends, but the best part is that she trained me on what I should be doing to take care of them. This was my first over $1,000/month account and it was an eye-opener. Until this time I had only been told what was possible, but hadn’t experienced it. Confidence is huge and this account gave me confidence. I started adding new accounts at a much faster pace after this.

Where's The Spoon

Because I started showing signs of making it Terry and Phil decided to assign me some house accounts that needed a sales rep. One of these accounts had an office manager named Alice. In our first meeting Alice looked me in the eye and said, “listen, I’m a New Yorker and I don’t put up with garbage. If you tell me you’re gonna do something, then do it.” I was surprised by her bluntness and because it sounded really easy. I thought to myself, “is that really all it takes to keep her happy?” The answer is “yes” and not just for Alice, but for anyone anywhere.

Alice was used to being lied to by sales people and she didn’t like it. In the sales world saying “yes” to every question always seems like the right answer because you don’t want to lose out on an opportunity. Anyone that deals with sales people knows that half the promises given are optimistic at best:

Company A, “Can your company turn around a delivery in 15 minutes, repair our copier, install new furniture, make us lunch and write a thesis for the owners daughter?”

Salesman, “As a matter of fact we can deliver your order in 7 1/2 minutes, fix your copier before it breaks down, install a new chairmat for Sally, bring in a fully catered meal and give a leather-bound and properly referenced thesis on business ethics in negotiations for Mary Lou.”

Company A, “Is there anything your company can’t do for us?”

Salesman, “No, we can do it all.”

I was initially afraid of Alice because I thought she might be a difficult customer to deal with, but she ended up being one of my easiest and best accounts. She was always very forthcoming and let me know what would keep them satisfied. As long as I kept my promises and recognized her needs then everything went well. In fact we still sell office supplies to this company today and my relationship with Alice is very special.

One of the customers I was never afraid of was a small company in downtown with a receptionist we will call Judy. At this point in my sales career I was thrilled with every opportunity to show someone how great I was as a salesman. I could help you find just the right toner for your printer or make an emergency delivery at any time. I wanted to make a positive impression with everything I did. One day Judy called to place an order. She worked in an office of about 5 people and by then I realized this company didn’t spend very much on supplies, but I still had to impress them. She would always do the same thing: call and have me find her a few options of what she wanted, pick one, ask for a price and then say, “can you do better than that for me?” Then I would reply, “yeah we can go from $5.98 on those legal pads down to $5.21” As long as we lowered the price to some random lower number Judy was content. These phone calls would usually last 20 minutes or more and by the end of it I would get the order entered and realize they had only spent $30-50. It’s kind of hard to make money doing that much work for a $50 order.

On one occasion Judy asked for paper clips. Now in our world of office supplies our wholesaler would actually sell as little as 1 box of 100 paper clips and they cost us about $0.05/box. We used to sell these paper clips as a differentiator from the big boys like Staples; “why, yes you can buy as few as 100 paper clips and they are $0.09/box.” So with this in mind I told Judy, “yeah we have paper clips and can do those for $0.09/box.” I was very confident that she would be impressed and we could move along with the order, but Judy replied, “hmmm, how much better can you do on that?” I lowered the price down to $0.05 all the while thinking how absurd it was that Judy would spend an extra minute on the phone, getting paid her hourly wages and not doing anything else to benefit her employer in order to save them $0.04 on their 1 box of paper clips. Pretty sure her employer and mine got the bad end of the deal on this one.

Hmm, can you do better than that-

The happy ending to the story with Judy was that a few years later she called to let me know that she was now an Avon lady. Valentines day was coming up and she wanted to know if I wanted to really impress my wife with some avon products. I wish I could say I had her give me a full rundown of every item in the catalog and then give a quote only to have me ask, “hmmm, can you do better than that for me?” I wasn’t smart enough to do that, but I did rather enjoy telling Judy that I wasn’t going to buy anything from her…

7th-Anniversary-Cupcake

So it’s our birthday and we are always excited about it. With every anniversary comes the realization that we are still around and still progressing towards our goal of being the biggest and best source for office supplies here on the Wasatch Front. It’s been 7 years since we first started Granite Office and there are so many crazy things that have happened. If you ever read the Money section of the USA Today, Fast Company or Fortune magazine you are accustomed to seeing success stories of companies that came out of seemingly nowhere. They interview the founders or other key employees about how it all happened. Or maybe you’ve seen The Social Network to see how Mark Zuckerberg created Facebook and became one of the wealthiest people in the world. Here in Utah we have the story of Larry Miller selling cars and eventually creating an impressive portfolio of businesses that include the Utah Jazz. I gotta admit that I love reading those stories or watching those movies. In some ways I would love to accomplish the same things. In others I’m really not that interested. I doubt anyone will come knocking down our doors to find out our secrets to success nor will anyone be paying for the rights to make a movie about us. If only there was a way to share our story; like an immense network of information that could be seen by anyone in any part of the world…a way to share a story that literally 10’s of 10’s would be interested in reading. A story not so much involved in cutting edge technology or crazy new methods of operation, but of how to start and operate a business in a dying industry. And dying it is. Let’s see we are a retail business that sells office supplies. Our top 5 selling sku’s are copy paper in an increasingly digital world. The next largest category of products we sell is toner and ink which have to be put on paper. The retail world itself is undergoing massive shifts. You’ve probably heard of Amazon. There are hundreds of others also trying to capitalize on this internet thing. So that’s where we live right now. Unsettling for sure. I mean not on par with JFK during the Cuban Missile Crisis, but when your living depends on it all of those outside conditions can be deflating if you let them.

Since I helped start a business that no one needed I may as well be the person to start a blog that is unnecessary. This will be a series of stories about our failures, blunders, mishaps and how those all turned into success. I think the image below says it better than I can in words:
Path To Success
Coming up with a title for this series was unimaginative and so easy. I can be called a lot of bad things, but like Forrest Gump I can recognize something for what it is. Give me a 1 foot putt and I’m gonna sink it (ok, 6″). Give me an uncontested layup and it’s going in. The names of some of the characters will likely be changed for obvious reasons, but the stories are real. The goal will be to entertain and provide insight into what has been an amazing ride so far. The title is “How Not To Start A Business…” and so we begin:

 How Not To Start A Business…

Planting A Seed

My name is Lee Mercer. I’m almost 37 years old and I grew up in a suburb of Salt Lake City called Bountiful, Utah. I am the 6th of 7 kids. Yes, we are a Mormon family and no, my dad didn’t have more than one wife. My dad was an accountant. He had his own practice and what I remember most of his job is he did lots and lots of tax returns for people and small businesses. Every year from January to April 15th my dad was really busy at work. Like so busy that it seemed like it was killing him. He would go to work during the day and the closer to April 15th it got the later into every night he would work. He told me numerous times that the only times he felt like he was actually getting his work done was late at night when he couldn’t be interrupted by other people. When tax day arrived we would have a party at home because dad and mom didn’t have to work as much.

taxday

All of my siblings have had a chance to work at dad’s office at one point in our lives. When I was 12 years old my brother Lonnie and I were the janitors for the office building he was in. We learned how to clean bathrooms, wash windows and mop and wax tile floors. Supposedly we learned how to clean grout, but to this day I don’t think we did anything different to that grout. We turned dark brown grout into lighter brown grout and for some reason my father would feel better about that.

grout

While I was attending the University of Utah I started working at the office helping do initial tax preparation. Once January arrived then the piles of tax returns would start to accumulate. My job was to take these files, make copies of what we needed and enter everything I could into the tax software program we had. After that my dad would go through the tax return and do the actual work of making sure the return was properly done. We learned at home and in the office that you never openly discuss what people make on their tax return. Dad did not like hearing anyone at home talking openly about the income of his clients. That was a big no-no. He realized the importance of maintaining the trust of his customers. So we knew what not to talk about, but we still got to see a lot of different careers and incomes and it definitely made an impact. I started taking mental notes on what I did or didn’t want to do for a career taking into account income, tax write-offs and other benefits. As you can probably imagine Doctors and Lawyers generally do quite well for themselves and they seem to have lots of disposable income so they start all sorts of side businesses, most of them with the objective to lose money for tax purposes. Successful realtors also make really good income and their tax shelters are usually in real estate. State and Federal employees were also very interesting to see how much money they make and how good their benefits were (some good and others not so much). There were also the more sad returns of retired people collecting their meager Social Security checks (let me tell you, you do not want to rely on your Social Security benefits in retirement). But the ones that really started catching my attention were the sales people and business owners. First of all their files were enormous. The business owners usually had two files; one for the business and the other for their personal return. The sales person files were just one large file stuffed with all sorts of documentation. At first I would avoid them because there were so many receipts in them that it would take an hour to prepare just one return while most others were 15-30 minutes. At the time I was working there the sales people that did the best seemed to sell cars or pharmaceuticals. Some of the W-2’s were eye-popping. A W-2 is the annual statement that shows how much you earned as an employee of a company. It also conveys some of the other benefits you may be earning like insurance premiums or retirement benefits. So it wasn’t hard to tell that these sales people were making a really good income and then you started into all these receipts. And man oh man the receipts. As far as I could tell if these sales people did anything at all it counted as a tax deduction: they could deduct the mileage on their car, take people out to eat and go golfing all the time and they all counted as deductions. I later learned more specifically how you have to ensure what is deductible as a legitimate business expense, but in contrast to most other careers the sales people looked like they had a great lifestyle. I thought to myself, “so I can go golfing with people, drive a nice car and eat in fancy restaurants and not only get paid, but get paid handsomely to do so? How do I land one of those gigs?”

Well, after I graduated from the U with a Spanish degree (not so helpful) and a business minor (very helpful) I started looking for a career. After a brief stint where I attempted to do real estate lending and failed I interviewed with 3 different companies. One was a tech company that made a specific software for Linux operating systems, another was a local bank working in retail banking and finally there was a sales job for an independent office supply company. I had actually worked for an office supply company as a delivery driver for about 2 years so I was quite familiar with the industry. The company I worked at was BT which was then purchased by Corporate Express which has since been purchased by Staples. As fate would have it the only company that offered me a position at the time was the office supply company. So I started my career as a salesman…

Dwight Schrute

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